SAS bridge funding keeps survival hopes in the air, shares soar

STOCKHOLM, Aug 15 (Reuters) – Scandinavian airline SAS (SAS.ST) maintained its survival bid at the weekend by securing bridge financing through bankruptcy protection proceedings, sending its shares soaring 5% Monday.

The airline, whose main owners are Sweden and Denmark, said on Sunday it had signed an agreement with US private equity firm Apollo Global Management (APO.N) for $700 million in funding to to fund its reorganization under U.S. Chapter 11 bankruptcy protection. Read more

SAS filed for protection in July, a day after most of its pilots launched a crippling two-week strike over collective bargaining. SAS said the action could scare off lenders and could threaten its existence. Read more

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SAS shares were up 5.3% at 1358 GMT, taking a month-on-month rise to 22%. The stock is still down 63% over the past year.

“The price to pay for being on the verge of bankruptcy is high, but now the process is underway, and the hard work to get billions in debt and drastically reduce costs can be accelerated,” said the Sydbank analyst, Jacob Pedersen.

“The reality remains that the assets of existing shareholders have disappeared and are exposed to great dilution upon completion of the capital raise,” Pedersen said in a note to clients, reiterating a “sell” recommendation. for SAS shares.

Pedersen said the deal with Apollo suggests Apollo could become a major shareholder of SAS by converting the loan into equity at the end of the Chapter 11 process.

SAS Link’s Embraer E195 plane lands at Kastrup airport, as Scandinavian Airlines pilots go on strike, in Kastrup, Denmark, July 4, 2022. TT News Agency/Johan Nilsson via REUTERS

A SAS spokesperson declined to speculate on potential new owners, but added that Apollo “apparently believes in the business and its future.”

“Who will become the owner in the end shouldn’t be speculated on, but it’s a possibility, absolutely,” said Louise Bergström, vice president of investor relations at SAS.

SAS, which was loss-making before the pandemic due to increasing competition from low-cost carriers, said it needed to cut costs further and raise more capital to survive.

“We have to convert old debt, we have to take in new capital, so there are still a lot of things to put in place. But now we have a much better chance,” Bergström said.

The Swedish government has rejected calls for more cash, but Denmark has said it could write off some of its debt and inject new funds if SAS finds support from private sector investors.

A spokesman for Denmark’s finance ministry said on Monday the government had taken note of the bridge financing deal and reiterated that its support for a rescue package launched by SAS in February was conditional on the airline attracting major new shareholders.

Copenhagen also wants to retain influence over a series of decisions to ensure SAS maintains a strong presence at Danish airports, which it says is important for the economy of the small Nordic country and for maintaining good global travel connections. .

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Reporting by Helena Soderpalm and Anna Ringstrom in Stockholm, Marie Mannes in Gdansk, Stine Jacobsen in Copenhagen; Editing by Edmund Blair and David Evans

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